Senate Votes to Ban All Sales by Toshiba in U.S.
The Senate, seeking to avenge damage done to Western military security, voted overwhelmingly Tuesday to bar Toshiba Corp. and a Norwegian firm from doing business in the United States for up to five years because they sold sophisticated submarine technology to the Soviets.
The measure, inserted into the massive trade bill that is grinding toward final Senate passage, prohibits the Japanese firm and Kongsberg Vaapenfabrik, Norway’s state-owned arms company, from receiving U.S. government contracts or from selling their products on the U.S. market for between two and five years.
The penalty, if imposed, would apply to all Toshiba products from lap-top computers and semiconductors to photocopiers and television sets and would have a significant impact on the company.
U.S. Sales Figures
A Toshiba spokesman in New York said the company’s total sales last year were $22.7 billion, of which at least 15% were in the United States. Sen. John Heinz (R-Pa.), a sponsor of the Senate measure, estimated that Toshiba’s American sales might account for as much as one-third of the huge electronics and machine tool company’s total revenues.
The Senate action, approved on a vote of 92 to 5, occurred as lawmakers in both houses of Congress asserted that tough penalties were necessary to discourage flagrant violations of the international agreement barring the sale of sensitive technology to the Eastern Bloc.
In the House, a measure is pending that would permanently ban both companies from the U.S. market.
The United States must “make the crime so unprofitable that companies will upgrade their technological security systems from the factory floor to the executive suite,” Heinz said.
In 1983 and 1984, Toshiba Machine, a subsidiary of the mammoth Japanese electronics conglomerate, and Kongsberg Vaapenfabrik made approximately $17 million in profit by selling the Soviets milling equipment that allowed them to make their submarine propellers run more quietly.
The refinement has made the submarines harder to detect and wiped out much of the U.S. advantage in submarine technology, Administration officials have said.
Under the Senate sanctions, the President would decide when the ban against the companies would be lifted within the five-year period. He could also exempt any technology needed for defense production--a loophole that could apply to the components Kongsberg is making for the Navy’s new Penguin missile.
Similar sanctions would be imposed on any other foreign companies that violate international technology sale agreements.
The Administration has strongly denounced the Toshiba-Kongsberg sale but it opposes punishment as sweeping as Congress is certain to pass, fearing a worsening of the already strained trade relations with Japan.
In a hearing Tuesday before a House subcommittee, representatives of the State, Defense and Commerce departments stressed that both the Japanese and Norwegian governments have taken steps to punish the companies involved. The president of Toshiba Machines has been fired and an investigation is continuing. In Norway, a senior Kongsberg official has been arrested.
Defense Secretary Caspar W. Weinberger, normally a hawk on the issue of technology diversion, commended Norway and Japan for taking “quite drastic and very decisive actions” to punish the companies.
However, in pressing for U.S. sanctions, lawmakers have seized on a Pentagon estimate that it could cost as much as $30 billion for the United States to regain the full submarine advantage it lost in the sale.
A tougher measure, proposed in the Senate by Sen. Richard C. Shelby (D-Ala.), would have barred all U.S. operations or sales by the companies indefinitely. A similar sanction, sponsored by Rep. Duncan L. Hunter (R-Coronado), is pending in the House.
The less stringent amendment that the Senate passed was presented by a bipartisan group that included Heinz, Jake Garn (R-Utah), William Proxmire (D-Wis.), John Glenn (D-Ohio), Alan J. Dixon (D-Ill.), Alfonse M. D’Amato (R-N.Y.) and John McCain (R-Ariz.).
Another proposal in the House, by Rep. John G. Rowland (R-Conn.), would simply prohibit the U.S. government from buying any Toshiba or Kongsberg products. Rowland warned that an outright ban on Toshiba sales in the United States could backfire against U.S. high-technology firms that need Toshiba-made semiconductor chips or other components in their products.
‘Grace Period’ Urged
“Along this line,” he said, “it might make sense to grant a ‘grace period’ to critical U.S. industries now using Toshiba products, but firmly require that at some point in time U.S. corporations must move to other sources.”
In the House hearing, E. Allan Wendt, the State Department’s senior representative for strategic technology policy, and Assistant Secretary of Commerce Paul Freedenberg said that the United States would be wiser to let the disciplining of the firms be worked out through the international coordinating committee that oversees East-West technology transfers.
To maintain international cooperation, “the United States does not have the option of going our own way,” Wendt warned.